Although the nation needs to await the completion of a “full autopsy” on Enron Corp., an initial analysis using public financial documents shows that the Houston energy trading giant was marked by “income that seldom matched its cash flows,” according to Portland, OR-based energy economist Robert McCullough, speaking Friday to an industry conference in Seattle, WA.

“While Enron was able to maintain high rates of growth, it was able to disguise its chronic lack of cash through super recourse financings and the collection of deposits,” McCullough said, citing a research paper for his energy industry clients that was completed earlier this week.

“Once Enron’s sales leveled off after the fourth quarter 2000, maintaining the illusion of prosperity proved impossible.”

Drawing short of equating the company with Ponzi schemes and financial pyramids, McCullough said Enron “created an illusion of manifest destiny.” He is unsparing in his criticism in a paper, “Deconstructing Enron’s Collapse,” that he distributed and quoted from at a two-day meeting, “Buying and Selling Electric Power in the West” (Jan. 17-18).

McCullough said that anyone reading Enron’s financial statements for 2000 “would have had no warning,” as they showed increasing sales, earnings and assets. He said that even the revelations of the off-balance sheet financing did not “directly affect the central business activities” of the company.

“What went wrong? What happened to the cash?” McCullough asked rhetorically in his research paper.

“Three scenarios have been suggested for Enron’s demise: the ‘Last of the Dot-Coms’, a ‘Ponzi scheme’, and ‘Barings Bank’ (1995 brought down by a rogue trading operation). In practice, these scenarios are not mutally exclusive. Enron’s superficial financial reporting — especially when combined with an indulgent financial environment — would provide the opportunity for all three.”

The full impacts of all of this on the energy industry cannot be determined at this time, McCullough said. It awaits a lot more detail that surely will be surfacing in the weeks and months ahead.

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